Budgeting in Your Early 20’s
If you’re constantly torn between wanting to save money for the future and wanting to treat yourself on a daily basis say “I.”
Whether it’s a quick pick up from a nearby store or a long night of online shopping… I can’t seem to stop spending. I was taught the value of a dollar from a very young age, but it took me 20 years to come to terms with the fact that the financial decisions I make now will inevitably affect me down the line. The sooner we start to pay more attention to our finances, the better off we’ll be.
So, let’s talk about budgeting. Here are the basics -
Track your income + expenses
It’s important to be observant of your spending habits before you try and stick to a strict budget. Keep track of your weekly or biweekly income and expenses, and think about what changes you might want to implement.
I recently started using Mint to track my spending and visualize my budget and it has been such an eye opener. It’s a free site that syncs your bank account, credit cards, student loans, etc. and tracks all of your incoming and outgoing money. Mint has forced me to be more mindful of where my money is going and I’m never looking back. (Try it!!)
Follow the 50/30/20 rule
You can thank Elizabeth Warren for this one! When setting up your budget, it’s recommended that you spend 50% of your income (after tax) on needs, 30% on wants, and put 20% into savings.
Keep in mind that this is meant to be used as a general guideline. Don’t stress yourself out trying to fit everything into these categories perfectly.
Set long + short term goals
Budgeting isn’t fun unless you have something you’re working towards. I really like the idea of setting goals for myself when it comes to saving money. You get to define what these mean to you. For example, a short-term goal of mine might be a new gold necklace or a trendy new shoe. A long-term goal could be moving into a new place or planning a trip to Europe.
Keep these goals in mind as you go about your day to day.
Redefine your luxuries
If you have big saving goals, you’re going to want to reevaluate your retail therapy habits. Think to yourself - is that daily coffee run or that recent online order you placed on a whim going to take away from a greater investment in your future? The answer is probably yes.
Set aside an emergency fund
If COVID-19 has taught me anything, it’s that you never know what life might throw your way. It’s always a good idea to have some money set aside for any unexpected expenses or loss of income.
Set a goal of one month’s salary, then three, and keep growing from there.
Invest in your future
This can be as simple as setting up a Roth IRA account. If you work a salary job, you’re going to want to take advantage and maximize your employer’s 401(k) match policy. This is free money!! If you don’t have a salary role, you can set up a Roth IRA on your own.
Don’t drown in debt
You’re going to want to apply for a credit card or two if you haven’t already. #1 rule: don’t fall behind on payments. You should treat these like debit cards. Spend only what you know you have and pay off your credit cards in full every month.
It’s crucial to start building your credit early. If you’re in debt, have a plan. Delegate how much you’re going to pay off every month. Don’t let debt follow you for years to come.
I hope you’ve found this helpful. I think this may be part one of a financial wellness series here on the blog, so stay tuned for more tips + tricks.
Are there any specific topics you’d like me to cover more in depth? Let me know in the comments or message me on IG @LifeWithCosy. Until next time.
☾☼ Cosette
